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ICT deflation and productivity measurement
Examines the impact and importance of ICT deflation that accounts for quality change on the measurement of productivity
Author: Gavin Wallis
Economic Trends, no 637, pp 40-45. ISSN: 0013-0400
Constant price productivity growth is generally the object of interest for productivity analysis. The rapid value added growth in the ICT sector relative to the whole economy, the rapid growth in ICT capital formation, and the remarkable and rapid advances in the characteristics and capabilities of ICT products, mean that reliable productivity analysis depends strongly on good measures of deflation for ICT products. These ICT deflators need to reflect pure price change, so measured prices need to be adjusted for quality change.
This article looks at the impact and importance of ICT deflation that accounts for quality change on the measurement of productivity, with examples and analysis drawn from recent Office for National Statistics (ONS) work. The article also looks at the development of input easures for multifactor productivity work, highlighting the importance of good quality deflators for ICT capital.
Published in web format: 11 December 2006 at 9:30 am
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